Ignacio Mas and Clara Veniard

An Update from the Financial Services for the Poor Team at the Gates Foundation

On November 16 and 17, the Bill & Melinda Gates Foundation hosted a Global Savings Forum which brought together more than 250 leading players from around the world including executives from financial service providers, mobile communication companies, international setting bodies, national regulatory agencies and central banks, academics and financial inclusion experts.

Panelists and participants agreed that savings services are highly demanded even by the world’s poor who live on less than $2 per day, and that electronic transactions platforms are necessary not just to increase access to financial services but also to facilitate government transfers, person-to-person transfers, bill payments, and microentrepreneurial activity. 85% of participants agreed that savings is likely to have the same or more impact than microcredit on the lives of the poor.

During the forum the foundation presented its strategy to provide millions of poor people in the developing world with affordable access to safe places to save. The foundation pledged an additional $500 million over the next five years to expand savings and demonstrate new kinds of financial infrastructure to bring savings to the poor (see Melinda Gates’ speech). We also announced a package of 6 new grants amounting to $39.8 million.

The foundation focuses its grant making on three main areas:

1. Savings Products. The foundation invests in the innovation, marketing, and evaluation of new savings products that are economically viable for both the financial service providers and the poor. One of the newly announced grants is a $600,000 grant to World Savings Bank Institute that will build on an existing program and identify major savings banks in developing countries that can double the number of savings accounts held by poor people. Also, a grant of $7 million to Yale University which intends to support Innovations for Poverty Action, a program that will strengthen understanding of the financial needs of the poor and the economic benefits of financial products by launching more than 20 studies to identify the best ways to reach the poor with savings products and money transfer services.

2. Delivery Channels. The foundation works with partners, including banks, telecommunication companies, retailers and others to support the development of new, safe, and affordable systems for delivering financial services to poor people, especially through the use everyday retail stores as transactional outlets and mobile phones as a payment instrument. Another of the new grants is of $4.8 million to Vodacom Tanzania which aims to increase awareness and usage of its mobile money service, M-PESA, and to reach at least 2 million people in 18 months. A $10 million grant to Shorebank International will help it support BRAC Bank Limited and Mobile In Motion to build bKash, a scalable mobile money platform that aims to help 17.5 million poor Bangladeshis to store, transfer, and receive money safely via their mobile phones within five years.

3. Enabling policy and advocacy. The foundation provides information, guidance and discussion forums to help regulators in the developing world to make policies that support financial services for the poor and create a safe regulatory environment for the poor to access savings. A new $11.4 million grant to the Research Department at The World Bank will allow it to include 10 financial questions on access and use of financial services in an existing global poll to generate first-of-a-kind internationally comparable baseline data on financial inclusion levels across 150 countries. The survey will be issued every three years to measure and track specific data on people’s use and access to formal and informal banking, and financial tools. Building on a major grant to the Consultative Group to Assist the Poor (CGAP) in 2006, a new grant of $6 million will promote the use of branchless banking to increase access to financial services, especially savings, through an innovation fund that supports promising approaches and advises banks, microfinance institutions, telecommunication providers, and financial regulators on effective design and regulation.

The diversity of these grants, as well as the diversity of the attendance we drew at our Global Savings Forum, underscore two key themes that pervade the foundation’s work and which got ample airtime at the forum. First, the need to leverage technology (and in particular mobile phones) to enable new commercially viable distribution models that deliver convenience and proximity to customers. Second, providers will increasingly need to specialize their activities on specific functions which they can excel at, and partner with others to deliver better services at much larger scale. Through these innovations, exponentially greater numbers of the poor will gain access to financial services.

financial inclusion, microfinance